RSI Classic Bullish Divergence and Classic Bearish Divergence Setups

Stocks classic divergence pattern is used by traders as a possible sign for a trend reversal. Classic divergence setup is used when looking for an area where price could reverse and start going in the opposite market direction. For this reason stocks trading classic divergence is used as a low risk entry method and also as an accurate way of exit out of a trade.

• Classic divergence is a low risk method to sell near the top or buy near the bottom of a market trend, this makes the risk on your trades are very small relative to the potential reward.

• Classic divergence is used to predict the optimum point at which to exit a trade

There are 2 different types of RSI Classic divergence setups:

1. Stocks Classic Bullish Divergence Setup
2. Stocks Classic Bearish Divergence Setup

Classic Trade Bullish Divergence

Classic bullish divergence occurs when price is making lower lows ( LL ), but oscillator technical indicator is making higher lows ( HL ).

Classic Bullish Divergence - RSI Strategies Methods

Classic bullish divergence warns of a possible change in the market trend from down to up. This is because even though the price went lower the volume of sellers that pushed the price lower was less as illustrated by the RSI indicator. This shows underlying weakness of the downward trend.

Classic bearish divergence

Classic bearish divergence occurs when price is making a higher high ( HH ), but oscillator technical indicator is lower high ( LH ).

Stocks Classic Bearish Divergence with RSI Indicator Strategies Methods

Classic bearish divergence warns of a possible change in the trend from up to down. This is because even though the price went higher the volume of buyers who pushed the price higher was less as illustrated by the RSI indicator. This shows underlying weakness of the upward trend.